The Pensions and Lifetime Savings Association’s (PLSA) survey of pension schemes finds that the sector is aware of the Brexit risks and the majority are taking steps to mitigate them. Anna Tobin reports
The PLSA surveyed 71 pension schemes representing DB and DC funds: 42% of its responses came from pension managers and directors; 21% from pension investment managers and directors; 17% from trustees; and 14% from chairs of trustee boards.
It found that 88% of workplace pension fund trustee boards have discussed the potential impact of Brexit on their scheme; 63% of all surveyed have formally assessed Brexit risks; 75% said they have discussed the potential impact on their sponsoring employer; and 55% of workplace pension schemes have taken specific action to mitigate the risk of Brexit.
Concerns arise, however, about the minority of pension schemes that have not taken these steps, although overall the industry seems more bullish than last year. In the same survey last year, 45% of pension schemes surveyed thought Brexit would have a negative impact on the value of their assets, there is more optimism this year with that figure dropping to 33%. There was concern, however, amongst pension managers and trustees about how Brexit could impact their sponsoring employer’s ability to support the scheme; 45% agreed with the statement that leaving the EU will have a negative impact on their employer covenant.
The top six actions pension schemes surveyed have taken to mitigate Brexit risks are: reviewed asset allocation; reviewed the employer covenant; reviewed currency hedging strategy; reviewed hedging strategy of non-currency risks; commissioned extra advice from professional advisers; and changed asset allocation.
“The PLSA has been engaging with the Government and regulators to ensure they fully understand pension schemes’ perspective on Brexit. We have also recommended actions for pension scheme trustees to ensure their scheme is well placed to deal with Brexit,” said James Walsh, head of member engagement at the PLSA.
“Our survey shows pension schemes have given a great deal of thought to the impact of Brexit on their operations and are well prepared. Savers should be reassured that their pensions are looked after. When we talk to our members, we hear a range of views about the extent to which Brexit will affect them, but they mostly cluster around how much they think Brexit is likely to impact their sponsoring employer, rather than the operations of the scheme itself.
“This varies markedly depending on the nature of the business. For example, some pension schemes with sponsors in the retail sector are worried that hold-ups at the ports could disrupt business and weaken the company, but others tell us their sponsors are confident that their supply chains will remain robust or that their business is entirely based in the UK and will remain stable.”